Ireland in the Clutches of the IMF and Financial Markets

One, two, three….and four! After Hungary, Romania, Greece, it is now Ireland’s turn to fall into the IMF’s and EU’s clutches. Unable to slow down the routing of Irish banks, which the ECB had been keeping afloat (as had the Irish State to the tune of 50 billion euro), Prime Minister Brian Cowen’s government resolved to ask the EU and the IMF for help.

Last Sunday evening, it notified that it was about to announce a four-year austerity plan in order to save 15 billion euro by 2014, namely 10% of the Irish GDP, so as to bring the deficit down from 32% to 3% of the GDP by 2014, in conformity with EU demands. The EU itself (who, finding it in dire straits, readily gave a helping hand to one of its States) made it clear that “its assistance to Ireland is justified in order to safeguard the EU’s and the euro-zone’s financial stability.” The package (no less than a rescue plan) will probably amount to something between 80 and 90 billion euro.

Restructuring Irish Banks

Even before the Irish government turned to the international financial institutions for assistance, FMI and UE experts prudently set to work in Dublin as early as Thursday last. Their first task consists in restructuring Irish banks, which means putting them on a slimming diet before recapitalizing them. What must follow is the old cure, and the Irish will have to bear the brunt of their leaders’ free-market fundamentalist policies. Their austerity plan will have most painful social consequences on the middle class and on the working class. Drastic cuts will once more follow, on public servants’ wages, on the minimum wage, on family allowances, and job-seekers’ benefits.

This austerity cure will come on top of those that were administered between 2008 and 2009, which resulted in salary cuts that ranged from 5 to 15%, a 5% reduction of family allowances and unemployment benefits, a rise in the income tax (over two billion euro) and in petrol and gas taxes. To these measures were added a 3,5-billion-euro package of budgetary cuts in January 2009, then an extra 4 billion euro cut in July 2009, both of which resulted in the loss of 120,000 public jobs out of a total of 320,000!

Gone are the days of the “Celtic Tiger”, so called by virtue of its yearly GDP growth (which averaged 7%between 2000 and 2009), when powered by the expansion of its real estate market and a domestic demand that were fired by easy access to bank loans, but which eventually led to an epidemic of excessive household debts. So when Ireland in its turn was hit by the financial crisis, the fall was brutal indeed: between 2008 and 2010 the GDP fell by 13%, direct investments by 52%, consumption by 15%, while the unemployment rate rose from 5% in 2008 to 14% in 2010. There is little chance that the potion administered by the IMF and the EU will go down well. As concerns the political situation, the government is threatened with an implosion following a decision by the Greens to call for an early general election, whereas unions (…) have already brandished the threat of social protest movements.